ET Section 291- Ethics Rulings on General and Technical Standards 


    [1.] Association of Name With Unaudited Statements When Member Is Not Independent

    [.001–.002]

    [Deleted September 1995]

    [2.] Opinion by Member Not in Public Practice

    [.003–.004]

    [Deleted December 1986]

    [3.] Controller, Preparation of Financial Statements

    [.005–.006]

    [Deleted May 1995]

    [4.] Two-Year Opinion—Prior Year Previously Unaudited

    [.007–.008]

    [Deleted May 1995]

    [5.] Interim Financial Statements

    [.009–.010]

    [Deleted October 1995]

    [6.] Letterhead

    [.011–.012]

    [Deleted September 1995]

    [7.] Non-CPA Partner

    [.013–.014]

    [Transferred to section 591.379-.380 as ethics ruling No. 190 under section 591, April 1995.]

    8. Subcontractor Selection for Management Consulting Service Engagements

    .015 Question—A member has been engaged to design and program a computer system. The engagement is well within the member's competence. The member plans to retain a contract programming organization as a subcontractor to provide additional qualified manpower. What procedures should the member consider in making the selection of a subcontractor?

    .016 Answer—When selecting subcontractors the member has a responsibility to ensure that the subcontractors have the professional qualifications, technical skills and other resources required. Factors that can be helpful in evaluating a prospective subcontractor include business, financial and personal references from banks, from other CPAs, and from other customers of the subcontractor; the subcontractor's professional reputation and recognition; published materials (articles and books authored); and the member's personal evaluation of the subcontractor.

    9. Supervision of Technical Specialist on Management Consulting Services Engagements

    .017 Question—A member would like to add to the member's staff a systems analyst who specializes in developing computer systems. Must the member be able to perform all of the services that the specialist can perform in order to be able to supervise the specialist?

    .018 Answer—The member must be qualified to supervise and evaluate the work of specialists in the member's employ. Although supervision does not require that the member be qualified to perform each of the specialist's tasks, the member should be able to define the tasks and evaluate the end product.

    10. Submission of Financial Statements by a Member in Public Practice

    .019 Question—A member in public practice is also a stockholder, partner, director, officer, or employee of an entity and in this capacity submits the entity's financial statements to third parties. What are the ethical considerations?

    .020 Answer—If the member submits the financial statements in his or her capacity as a stockholder, partner, director, officer, or employee to a third party, the member should clearly communicate, preferably in writing, the relationship of the member to the entity and should not imply that the member is independent of the entity [ET section 191.130-.131]. In addition, if the communication states affirmatively that the financial statements are presented in conformity with generally accepted accounting principles, the member is subject to rule 203 [ET section 203.01] of the Code of Professional Conduct.

    If the member prepares financial statements as a member in public practice and/or submits them using the member's public practitioner's letterhead or other identification, the member should comply with applicable standards, including any requirement to disclose a lack of independence.

    [Revised, effective July 31, 2002, by the Professional Ethics Executive Committee.]

    [11.] Applicability of Rule 203 to Members Performing Litigation Support Services

    [.021–.022]

    [Deleted August 2011, effective November 30, 2011.]

    12. Applicability of General and Technical Standards When Using a Third-Party Service Provider

    .023 Question—What responsibility does a member in public practice have for complying with the general and technical standards under Rule 201, General Standards [ET section 201.01], and Rule 202, Compliance With Standards [ET section 202.01], when using an entity that the member, individually or collectively with his or her firm or with members of his or her firm, does not control (as defined by in Financial Accounting Standards Board Accounting Standards Codification 810, Consolidation) or an individual not employed by the member (a third-party service provider) to assist the member in providing professional services (for example, bookkeeping, tax return preparation, consulting, or attest services, including related clerical and data entry functions) to clients?

    .024 Answer—Using a third-party service provider to assist the member in providing professional services to clients does not in any way relieve the member from his or her responsibilities to comply with the requirements of Rules 201 [ET section 201.01] and 202 [ET section 202.01]. Accordingly, the member remains responsible for the adequate oversight of all services performed by the third-party service provider and for ensuring that all professional services are performed with professional competence and due professional care. In addition, the member must adequately plan and supervise the professional services provided by the third-party service provider, obtain sufficient relevant data to support his or her work product and comply with all technical standards applicable to the professional services.

    This ruling does not extend the member's responsibility for planning and supervising the work of a third-party service provider beyond the requirements of applicable professional standards, which may vary depending upon the nature of the member's engagement.

    See ethics ruling No. 112 [ET section 191.224–.225] under Rule 102 [ET section 102.01], Integrity and Objectivity , and ethics ruling No. 1 [ET section 391.001–.002] under Rule 301, Confidential Client Information [ET section 301.01], for additional responsibilities of the member when using a third-party service provider. 

     [Revised effective May 31, 2011]




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